Operations and Supply Chain Management The Core

STRATEGY AND SUSTAINABILITY chapter 2 35
Risk Mitigation Strategies exhibit 2.3
RISKS
Natural disaster (e.g., climate change, weather)
Country risks
Supplier failures
Network provider failure
Regulatory risk (e.g., licensing and regulation issues)
Commodity price risks
Logistics failure
Inventory risks
Major quality failure
Loss of customers
Theft and vandalism
RISK MITIGATION STRATEGY
Contingency planning (alternate sites, etc.), insurance
Currency hedging, locally producing/sourcing
Multiple suppliers
Support of redundant digital networks
Up-front and continuing research; good legal advice, compliance
Multisourcing, commodity hedging
Safety stock, detailed tracking, and alternate suppliers
Pool inventory, safety stock
Careful selection and monitoring of suppliers
Service/product innovation
Insurance, security precautions, knowledge of likely risks, patent
protection, etc.
Natural/
human-made
disasters
Country
risks
Supplier
failure
Network
provider
failure
Regulatory
risk
Commodity
price risks
Logistics
failure
Inventory
risks
Quality
risks
Outsourcing
Sole sourcing
Lean
practices
Distribution
hubs
High
impact
Moderate
impact
No
impact
Productivity is what we call a relative measure. In other words, to be meaningful, it
needs to be compared with something else. For example, what can we learn from the fact
that we operate a restaurant and that its productivity last week was 8.4 customers per labor
hour? Nothing!
Productivity comparisons can be made in two ways. First, a company can compare itself
with similar operations within its industry, or it can use industry data when such data are
available (e.g., comparing productivity among the different stores in a franchise). Another
approach is to measure productivity over time within the same operation. Here we would
compare our productivity in one time period with that in the next.
As Exhibit 2.4 shows, productivity may be expressed as partial measures, multifactor
measures, or total measures. If we are concerned with the ratio of some output to a single
input, we have a partial productivity measure. If we want to look at the ratio of some output
to a group of inputs (but not all inputs), we have a multifactor productivity measure. If
we want to express the ratio of all outputs to all inputs, we can use a total factor measure of
productivity to describe the productivity of an entire organization or even a nation.